Connected for Success Significant Refurbishment 1. Key Criterion 2. Impact on operating surplus 3....

Connected for Success

Significant Refurbishment

1. Key Criterion

2. Impact on operating surplus

3. Impact on funding

4. Quick assessment

2

1. Key Criterion2. Impact on operating surplus3. Impact on funding4. Quick assessment

Key Criterion – Part 1

• Start or complete after 20 April 2012

• The refurbishment impacts: – At least 40% of the care recipients rooms; or – At least 40% of the care recipients being provided with residential

care through the service; or – If it is an extension, at least 25% of the number of care recipient’s

rooms in the service.

• Provides significant benefit to supported residents

4

Key Criterion – Part 2

• Minimum investment = 40% of beds x $25,000

• Beds = lower of either the number of places before the refurbishment or the number after the refurbishment.

5

1. Key Criterion 2. Impact on operating surplus3. Impact on funding4. Quick assessment

Subsidised Residents

Accommodation Subsidy

Current Refurbishment % difference

Meet Concessional Ratio (>40%)

$34.20 $52.49 54%

Does not meet concessional ratio (<40%)

$25.65 $39.37 35%

Impact on:• Concessional/Assisted Residents• Fully Supported Residents• Partly Supported Residents

7

Scenario 1 – Meets Concessional Ratio

Facility XYZ

Beds in Facility 100 Resident MixCurrent Occupancy 100% Non - subsidised DAP residents 20

Non - subsidised RAD residents 37Current Price Total Subsidised Residents 43DAP 42$ RAD 231,222$ Funding

Internal Funding 500,000$ Resident Turnover Rate/year 15.0% External Funding 700,000$

Borrowing rate 7.00%Planned Expenditure 1,200,000$ Term of loan 5

Investment Rate 4.00%

Self – funded DAP Residents

• If DAP price is below $52.49– Minimum DAP increased to Government subsidy rate– Consider turnover of residents

Self – funded RAD Residents

• If DAP price is below $52.49– Minimum RAD increased in line with increase in DAP– Consider turnover of residents

Marginal Revenue Increase

11

Scenario 2 – Does not Meet Concessional Ratio

Facility ABC

Beds in Facility 100 Resident MixCurrent Occupancy 100% Non - subsidised DAP residents 20

Non - subsidised RAD residents 43Current Price Total Subsidised Residents 37DAP 42$ RAD 231,222$ Funding

Internal Funding 500,000$ Resident Turnover Rate/year 15.0% External Funding 700,000$

Borrowing rate 7.00%Planned Expenditure 1,200,000$ Term of loan 5

Investment Rate 4.00%

Marginal Revenue Increase

13

1. Key Criterion2. Impact on operating surplus3. Impact on funding4. Quick assessment

Financing

• Internal Funds– Opportunity Cost– Liquidity Management Strategy

• External Funds– Cost of Debt– Funding repayment

15

S1 - Revenue Contribution v Interest

16

S2 - Revenue Contribution v Interest

17

1. Key Criterion2. Impact on operating surplus3. Impact on funding4. Quick assessment

Assess Investment

• Return on Investment

• Cash flow

• Payback Period– On internal cash invested – Total Investment outlay

19

S1 - Cash flow Movements

Results per Scenario 1

Marginal Revenue increase (after full resident TO) 451,306$

Increase in RAD Pool 1,816,249$

Payback period (Years) on internal cash used 1.07

Payback period (Years) on total expenditure 2.47

Average annual return on investment over 10 years 33%

S2 - Cash flow Movements

21

Results per Scenario 2

Marginal Revenue increase (after full resident TO) 186,673$

Increase in RAD Pool -$

Payback period (Years) on internal cash used 7.13

Payback period (Years) on total expenditure 10.88

Average annual return on investment over 10 years 16%

23

Result for your facility?